Dalio said that QE3 was a good plan. When you ease interest rates, it stimulates private sector credit growth. And then after that you utilize quantitative easing. He feels the US dollar is squeezed due to lots of dollar denominated debt, but after this squeeze he says it's going to decline in the near-term.

On China

The hedge fund titan points out that China can have 6% growth and still think that's depressing all while the US has 2% growth.

Just yesterday we posted about how Jim Chanos is still short China. And of course we've also highlighted the China hedge fund bear thesis.

On Gold

He says "it should be part of everyone's portfolio to some degree because it diversifies the portfolio." He likens gold to an alternative version of cash and over the long term he says it's better than cash. "Money can be produced, but gold is somewhat limited."

On Europe

Bridgewater's founder says there's going to be a "managed depression" in southern Europe in the next few years, and thinks we'll see both a combination of monetary policy (money printing) and a deleveraging and restructuring of debt over there. He says the euro is "likely" to stay together and it is controlled by southern Europeans, though there's more risk for the currency in later years.

On His Biggest Worry

He worries about social distortion and another leg down in various economies causing them. He notes that deleveragings can be painful and we've posted up Dalio's in-depth look at deleveragings before.

On a Possible Downturn in the US Economy

The Bridgewater founder said that the odds of an unmanaged downturn are "comparatively low." He likens it to flying on a plane where you could hit an air pocket and that's when problems could arise.

Ray Dalio, the billionaire investor who runs the world’s largest hedge fund out of Westport, said the euro will “likely” stay together because austerity measures deterring growth will be balanced by European Central Bank intervention. “Restructuring of debt and austerity are deflationary, and they are negative for growth.

Bridgewater Associates LP, the $140 billion hedge fund founded by Ray Dalio, is betting on global stocks and oil as it expects money to move into equities and other assets amid increased economic confidence.

Bridgewater, the world’s biggest hedge fund, is bullish on stocks, oil, commodities and some currencies as it expects cash to shift to riskier assets, co-chief investment officer Bob Prince said on a client conference call on Jan. 23.

“You want to be borrowing cash and hold almost anything against it,” Prince said, according to a transcript of the call obtained by Bloomberg News. “We are at a possible inflection point right now with respect to the pricing of economic conditions in markets and then the actual conditions that are likely to occur.”

Ray Dalio’s Bridgewater Associates LP, one of the world’s largest hedge funds, increased its exposure to the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) during the third quarter while reducing its allocation to the SPDR S&P 500 ETF (NYSEArca: SPY).

Bridgewater added 4.5 million shares of EEM during the third quarter while paring its SPY stake by 1.84 million shares, reports Ken Kohn for Bloomberg. SPY is the world’s largest ETF while EEM is the second-largest emerging markets ETF by assets.

Bridgewater Associates founder Ray Dalio appeared on CNBC today from the World Economic Forum in Davos to give his thoughts on the economy and markets. Here's some of the highlights and videos.

- Said the markets are in a 'Goldilocks' period after a beautiful deleveraging as everything is 'pretty good' with a big jolt of stimulation coming from tax laws. He says we're at the 'later part of the cycle' and there's a lot of cash on the sidelines (banks, corporations, etc). "We're going to be inundated with cash."

- Thinks it might eventually lead to a market blow-off. Thinks markets will continue to melt up: "If you're holding cash, you're going to feel pretty stupid." Says last part of the cycle could perhaps last a year.

- Focused on interest rate policy as even a little change there can lead to a bear market. Dalio says you can't have a significant rise in interest rates without knocking over asset prices. It seems he's saying anything above 4% could potentially get dicey. Says there's much more interest rate sensitivity than before.

- Also notes that the various bonuses companies are paying out from the tax cuts won't move the needle much on the wealth gap as the middle class has been most impacted by soft income growth. He's not worried about an immediate downturn, but if there's a good chance there's a downturn in 2-3 years, he's worried about how the difference between rich and poor will affect things.

- On bitcoin, he doesn't know how to value it but thinks it's been a bubble. Thinks the blockchain technology is useful but doesn't have any other comment.

Ray Dalio: 'Risks of a recession' are risingBridgewater Associates founder Ray Dalio says in a LinkedIn blog post that the Federal Reserve's response to better-than-expected economic data and more fiscal spending may lead to an economic slowdown."What we do know is that we are in the part of the cycle in which the central banks' getting monetary policy right is difficult and that this time around the balancing act will be especially difficult," he writes.

"What we do know is that we are in the part of the cycle in which the central banks' getting monetary policy right is difficult and that this time around the balancing act will be especially difficult (given all the stimulation into capacity constraints and given the long durations of assets and a number of other factors) so that the risks of a recession in the next 18-24 months are rising," Dalio wrote in a LinkedIn blog post. "While most market players are focusing on the strong 2018, we are focusing more on 2019 and 2020 (which is the next presidential election year)."

The hedge fund manager said in an Jan. 23 interview with CNBC that investors will see "a market blowoff" rally fueled by a flood of cash.